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Stock market reassured by Ben Bernanke

The US stock market has extended its gains today, with Federal Reserve Chairman Ben Bernanke repeating yesterday’s testimony, this time before the Senate Banking Committee, and continuing to provide assurance that care will be taken with the way in which stimulus is removed.

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Mr Bernanke gave confidence to investors yesterday with his assertion that stimulus would only be eased once he was confident the strength of the economy warranted it. He repeated the prepared remarks again today, but provided further detail in the question and answer session that followed his testimony in front of the Senate Banking Committee.

He said that it was too early to establish whether tapering will be announced at the next FOMC meeting, with economic indicators having been mixed since the last meeting. Regardless of when QE does actually get wound down, Mr Bernanke said that he sees a long stretch of accommodation following the conclusion of the Fed’s stimulus.

After a rough patch of volatility, Mr Bernanke appears to have got the markets to come round to his way of seeing things. Investors know that tapering is on its way in exchange for improvements in the economy, and have the re-assurance that rates will be kept extremely low for a long time. They are also seeing some decent earnings this week, so the current bullishness of the market is understandable.

The Dow was up 0.4% at 15,532 with less than half an hour to go to the close in New York. After the bell we will hear quarterly reports from another cluster of big names, including Microsoft and Google.

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